Croatia to send its reply to EC on loan conversion early next week, says minister

Finance Minister Zdravko Maric has said that the government's reply regarding the conversion of loans pegged to the Swiss franc will be sent to the European Commission early next week at the latest.

"We will send our reply to the EC by the start of next week at the latest, and definitely by September 30," Maric told reporters.

He explained that the government did not have to discuss the reply and that it should only be discussed by a coordinating body for foreign affairs.

"The letter is being finalised and will be sent on time," he said declining to reveal any details.

The EC on June 16 sent Croatia an official letter of warning regarding its law on the conversion of loans pegged to the Swiss franc into euro-denominated loans, claiming that the conversion law shifted all of the conversion cost onto banks and that its retroactive application jeopardised the principle of legal security.

The initial deadline for a reply to the letter was August 16 but was extended to September 17.

A letter with a formal warning is the first step the EC takes against a country it believes has violated EU law.

If the country fails to reply to the letter or fails to provide a satisfactory explanation in its reply, the EC takes the second step, namely a reasoned opinion. If after that there is still no satisfactory response, the EC may approach the Court of the EU.

The EC objects that the law adopted by the Croatian parliament allows all loan holders (except for legal persons) to retroactively convert loans pegged to Swiss francs into euro loans in line with historical exchange rates, regardless of their ability to repay those loans. That makes loan conversion costs fall entirely on creditors.

The EC believes that it is necessary to strike a balance between the interests of consumers and the need to protect the single capital market and its legislative framework.

As for lawsuits banks have announced over the loan conversion law, Maric said that talks with banks would continue "on the home front as well" so as to see if an out of court solution was possible to agree.

Asked about the government's strategy in talks with banks, Maric said that it would focus on the protection of national interests, the state budget and taxpayers' interests.

"That is our starting position," he said.

Asked if he was in favour of levying taxes on banks, Maric said that he advocated making the tax system simpler, more competitive, more transparent and stable.

He announced that he would go public with a tax reform very soon.

"The tax system cannot solve all of the country's problems, but it can facilitate certain things. I have always advocated lifting, simplifying and lowering taxes," said Maric.

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